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    Week 1 Practice Solutions

    Uploaded by

    alexandra
    - Darren Jones deposited $35,000 of personal funds into a business bank account. - Equipment was purchased for $24,000 with $14,000 paid in cash and $10,000 financed. - $5,000 was collected from customers while $1,500 was paid for rent and $1,450 for wages and expenses. - Supplies of $2,100 were purchased on credit and later paid for. $750 of supplies were used during the month.

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    Week 1 Practice Solutions

    Uploaded by

    alexandra
    257 views7 pages
    - Darren Jones deposited $35,000 of personal funds into a business bank account. - Equipment was purchased for $24,000 with $14,000 paid in cash and $10,000 financed. - $5,000 was collected from customers while $1,500 was paid for rent and $1,450 for wages and expenses. - Supplies of $2,100 were purchased on credit and later paid for. $750 of supplies were used during the month.

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    - Darren Jones deposited $35,000 of personal funds into a business bank account. - Equipment was purchased for $24,000 with $14,000 paid in cash and $10,000 financed. - $5,000 was collected from customers while $1,500 was paid for rent and $1,450 for wages and expenses. - Supplies of $2,100 were purchased on credit and later paid for. $750 of supplies were used during the month.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    257 views7 pages

    Week 1 Practice Solutions

    Uploaded by

    alexandra
    - Darren Jones deposited $35,000 of personal funds into a business bank account. - Equipment was purchased for $24,000 with $14,000 paid in cash and $10,000 financed. - $5,000 was collected from customers while $1,500 was paid for rent and $1,450 for wages and expenses. - Supplies of $2,100 were purchased on credit and later paid for. $750 of supplies were used during the month.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 7

    PRACTICE SOLUTIONS

    Exercise 2.1 Preparing a balance sheet

    Financial items for George Karatsis IT Services on 31 May 2019 are presented below in alphabetical
    order.
    Accounts payable $ 64 000 Land $250 000
    Accounts receivable 70 000 Mortgage payable 710 000
    Building 520 000 Office equipment 180 000
    Cash at bank 61 000 Office supplies 34 000

    Required
    A. Prepare a balance sheet in account format as in figure 2.2. (Note that a major item is missing in
    the list.)

    B. Reformat the statement of financial position to present it in narrative form as in figure 2.3.

    A. SOFP in Account Format

    GEORGE KARATSIS IT SERVICES


    Balance Sheet
    as at 31 May 2019
    ASSETS LIABILITIES
    Cash at bank $61 000 Accounts payable $64 000
    Accounts receivable 70 000 Mortgage payable 710 000
    Office supplies 34 000 774 000
    Office equipment 180 000
    Land 250 000 EQUITY
    Building 520 000 George Karatsis, Capital 341 000
    $1 115 000 $1 115 000
    B. SOFP in Narrative Format

    GEORGE KARATSIS IT SERVICES


    Balance Sheet
    as at 31 May 2019
    ASSETS
    Cash at bank $61 000
    Accounts receivable 70 000
    Office supplies 34 000
    Office equipment 180 000
    Land 250 000
    Building 520 000
    TOTAL ASSETS $1 115 000

    LIABILITIES
    Accounts payable $64 000
    Mortgage payable 710 000
    TOTAL LIABILITIES 774 000
    NET ASSETS $341 000

    EQUITY
    George Karatsis, Capital $341 000
    TOTAL EQUITY $341 000
    Exercise 2.2 Income statement and analysis

    During the year ended 30 June 2019, Skilled Services, a provider of temporary secretary personnel,
    had collected receipts from clients for a total value of $250 000. Wages of $136 000 had been paid to
    the temporary workers, rental of office space and electricity costs were $12 000 and $13 700
    respectively for the year, and the owners withdrew $20 000 for their personal use.

    Required
    Prepare an income statement or SOCI for the year for Skilled Services.

    SKILLED SERVICES
    Income Statement
    for the year ended 30 June 2019
    INCOME
    Services income $250 000

    EXPENSES
    Wages $136 000
    Office Rental 12 000
    Electricity Expenses 13 700

    161 700
    PROFIT $88 300
    Exercise 2.3 Analysis of equity

    Sarah Hodge is a self-employed piano teacher operating her business from home. She keeps her
    accounting records for business activities completely separate from her records for personal
    activities. At 30 June 2018, Sarah had business assets and liabilities worth $62 500 and $41 000
    respectively. At 30 June 2019, Sarah had business assets and liabilities worth $56 000 and $38 000
    respectively.

    Required
    A. Assuming Sarah did not contribute to or withdraw from the business during the financial
    year, determine the profit/loss for the year.
    B. Assuming Sarah had withdrawn $15 000 during the year, determine the profit/loss for the
    year.
    C. Assuming Sarah had contributed $20 000 and withdrawn $12 000, prepare a statement of
    changes in equity for the year.

    Calculation of Equity as at 30 June 2015: $62 500 – $41 000= $21 500

    Calculation of Equity as at 30 June 2016: $56 000 – $38 000 = $18 000

    A. Capital Contributions and Drawings are nil for the year.

    Ending Equity $18 000 – Beginning Equity $21 500


    = Loss of $3500.

    B. Capital Contributions nil and drawings $15 000 for the year.

    Ending Equity $18 000 – (Beginning Equity $21 500 – Drawings $15 000)
    = Profit $11 500.

    C.
    SARAH HODGE – PIANO TEACHER
    Statement of Changes in Equity
    for the year ended 30 June 2019
    Sarah Hodge, Capital – 1 July 2018 $21 500
    Add: Capital contribution for the year 20 000
    Less: Loss for the year* (11 500)
    30 000
    Less: Drawings during the year 12 000
    Sarah Hodge, Capital – 30 June 2019 $18 000

    * Loss is the balancing item.


    Problem 2.18 Determining missing elements in accounting equation

    Calculate the two missing amounts for each independent case below.

    Total Total Total Total Total Profit


    Case assets liabilities equity income expenses (loss)
    A $90 000 $37 000 $53 000 $76 000 $52 000 $24 000
    B $110 000 $28 000 $82 000 $45 000 $56 000 ($11 000)
    C $71 000 $18 000 $53 000 $80 000 $90 000 ($10 000)
    D $93 000 $43 000 $50 000 $14 000 $32 000 ($18 000)
    E $175 000 $55 000 $120 000 $91 000 $60 000 $31 000
    Exercise 2.11 Recording transactions

    Jones’ Mower Repairs began operations on 1 August 2019 and completed the following transactions
    during the first month.

    1. Darren Jones deposited $35 000 of his personal funds in a current account at a bank opened in the
    name of the business.
    2. Mower repair equipment was purchased at a cost of $24 000, of which $14 000 was paid in cash. A
    loan payable was given for the remainder.
    3. Darren collected $5000 from customers for repair services performed.
    4. Shop rent was paid for the month of August, $1500.
    5. Supplies amounting to $2100 were purchased on credit.
    6. Wages of $1200 were paid as well as an account for electricity, $250.
    7. Darren paid for the supplies purchased in (5) above.
    8. Supplies used during August amounted to $750.

    Required
    A. Prepare a schedule. List the following assets, liabilities and equity as column headings: Cash
    at Bank; Supplies; Equipment; Loan Payable; Accounts Payable; D. Jones, Capital.
    B. Show the effects of each of the transactions on the accounts listed. Indicate totals after each
    transaction and complete the schedule.
    C. Prepare an income statement and a statement of changes in equity for the month ended 31
    August 2019, and a balance sheet as at 31 August 2019.

    A and B.
    Assets = Liabilities + Equity

    Cash at Accounts Loan D. Jones,


    Supplies Equipment
    Bank + + = Payable + Payable + Capital
    (1) $35 000 = + + $35 000
    (2) –14 000 + $24 000 $10 000
    21 000 + 24 000 = 10 000 + 35 000
    (3) + 5 000 + 5 000
    26 000 + + 24 000 = + 10 000 + 40 000
    (4) –1 500 – 1 500
    24 500 + 24 000 = + 10 000 + 38 500
    (5) + 2 100 2 100
    24 500 + 2 100 + 24 000 = 2 100 + 10 000 + 38 500
    (6) –1 450 – 1 450
    23 050 + 2 100 + 24 000 = 2 100 + 10 000 + 37 050
    (7) –2 100 –2 100
    20 950 + 2 100 + 24 000 = 0 + 10 000 + 37 050
    (8) - 750 – 750
    20 950 + 1 350 + 24 000 = 0 + 10 000 + 36 300
    C.
    JONES’ MOWER REPAIRS
    Income Statement
    for the month ended 31 August 2019
    INCOME $ $
    Services income $5 000

    EXPENSES
    Rent expense 1 500
    Wages expense 1 200
    Electricity expense 250
    Supplies used 750
    3 700
    PROFIT 1 300

    JONES’ MOWER REPAIRS


    Statement of Changes in Equity
    for the month ended 31 August 2019
    $
    D. Jones, Capital – 1 August 2016 0
    Add: Capital contribution 35 000
    Profit for the month 1 300
    36 300
    Less: Drawings during the month 0
    D. Jones, Capital – 31 August 2016 36 300

    JONES’ MOWER REPAIRS


    Balance Sheet
    as at 31 August 2019
    ASSETS $
    Cash at bank 20 950
    Supplies 1 350
    Equipment 24 000
    TOTAL ASSETS $46 300

    LIABILITIES
    Accounts payable 0
    Loan payable 10 000
    TOTAL LIABILITIES 10 000
    NET ASSETS $36 300

    EQUITY
    D. Jones, Capital $36 300
    TOTAL EQUITY $36 300

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